On Thursday, at the Energy Users Conference, the government’s chosen head of the chive quango running the electricity supply industry, Kerry Schott, remarked that coal plants could no longer compete. According to The Australian (her speech has not been made public) she said “you are unlikely to see a new coal-fired generation plant unless there is a change in technology and a decline in the price of coal”.
Had she simply wandered off her politics-free advisory role and opined that, given the level of agitation against coal, a new plant is unlikely, her remarks would have been unexceptional. But her clear inference is that coal is now behind exotic renewables in the price pecking order.
This shows an unawareness of the 1000 plus generators under construction around the world, including in Japan where coal’s role has been elevated to supply 30 per cent of electricity by 2030, with 36 new plants, compared to 10 per cent previously envisaged. Nor is she aware of different generation costs, including that of the thorough analysis commissioned by the Minerals Council which showed new coal plant, even with costs to reduce emission levels (though not the elusive carbon capture and storage technology), could be built in Australia to be profitable at $40 per MWh.
If renewable plant could be built to provide energy at such a price we would now still be seeing electricity at the $40 per MWh price we saw in 2015 before the renewable bite brought a doubling of prices. Renewables, as well as getting the $80 per MWh market price also get the Renewable Energy Target (RET) subsidy of $85. There are alleged renewable contracts at some $60 but in all cases the subsidy would be added to this.
Minister Frydenberg has suggested in his 2gb conversation with Alan Jones that, come 2022, the RET subsidy will disappear as renewables will have become so cheap that it will be competed away. Such pie-in-the -sky notions have been unconsummated for thirty years – and are only possible four years hence if the spot price becomes $100 as a result of the retirement or mothballing of fossil plant. Needless to say $100 per MWh would be disastrous for Australian industry competitiveness and for living standards.
Ms Schott has a lengthy cv advising governments since the Whitlam days and has links wth the PM from when he ran a consultancy with Nicholas Whitlam. Her most recent managerial job was as CEO of Sydney Water when she embarked upon a massive desalination plant, said to be necessary but unused since being commissioned in 2007.
She has had little experience in energy but had been somewhat consistent in her attitude to renewables, a consistency that was doubtless a recommendation to the PM in picking her for the ESB. Her position on the future of electricity persuaded her to advise the NSW government that it was a good deal to sell Vales Point for $1 million, an asset now worth $750 million. Nor did she see any point in offloading a relatively well maintained Liddell to AGL for a nominal sum, providing the firm with market power without seeking assurances that it would be kept operation for the following 15 years.
Minister Canavan said he has “asked Ms Schott to explain what evidence she is relying on to make these conclusions”, falling not far short of the demand by the Parliament’s leading energy specialist, Craig Kelly, that she resign. She now says she was not trying to be political and that the NEG she is responsible for is technology neutral, a point forcefully asserted by Minister Frydenberg.
But Ms Schott was really only belling that cat. The NEG cannot be technology neutral. It is designed to ensure a lower level of emissions from electricity production than would otherwise occur. It cannot be other than a set of regulations designed to adversely affect the competitiveness of the more CO2 intensive coal fuelled generators.
The complexity of electricity and its susceptibility to slogans, like those that say “sunlight is free”, mean even the most sceptical politicians (and bureaucrats) are reluctant to offer views that risk the assault of the well financed subsidy-driven lobby that has the support of vacuous and shouty greens. But unless they do the future is one of continued deindustrialisation and living standards markedly lower than they should be.